Payday Blues

To the editor: In her Dec. 9 article “Cash-Trapped,” reporter Betty Brink quoted State Sen. Wendy Davis as saying that the payday lending industry is unregulated. This claim is false; payday lending is highly regulated at the state level. Regulations include, among other things, capping the amount customers can borrow and the fees lenders can charge. States also generally either prohibit loans from being “rolled over” (i.e. extended with another fee being charged) or limit the number of rollovers that customers are allowed to make to one or two times. In fact, the payday lending industry has worked with policymakers in 35 states to provide responsible regulation that protects consumers and their access to credit. Instead of limiting options, a better solution is to keep freedom of choice for consumers. In a state-regulated environment, payday advances can often be the best choice.

Tommy Moore

Executive Vice President

Community Financial

Services Association of America

Alexandria, Va.

To the editor: Betty Brink’s story “Cash-Trapped” does little to distinguish small, short-term loans, often referred to as payday advances, from other financial services and completely ignores an extensive array of federal and state regulations that govern the industry.

In Texas, credit service organizations (CSOs) provide retail financial products and services to consumers. From stores in neighborhoods across the state, CSOs make sure hardworking Texans have access to small short-term loans, money orders, pre-paid telephone and debit cards, and other services to help them manage their finances.

Small short-term loans are indeed regulated financial products. They are subject to the Texas Finance Code, the Texas Constitution, and no fewer than seven federal laws and regulations. CSOs are subject to the Texas Deceptive Trade Practices Act that imposes treble damages for wrongdoing.

Readers should know that the average loan amount is $350. Interest rates are limited to 10 percent per annum by the Texas Constitution. Fees for loan services provided by CSOs are market-based and typically range from $15 to $22 per $100 borrowed.

All borrowers must have a checking account at a bank or a credit union. Furthermore, all customers must have the financial ability to repay the loan.

As a representative of the Consumer Service Alliance of Texas (CSAT), a trade association representing the interests of consumers and CSOs across Texas, I think it’s important to point out that short-term lenders encourage customers to budget responsibly and save so they will not have to borrow for every financial emergency. But we firmly believe that consumers should have a variety of choices when deciding how to meet individual and family financial needs.

It’s unfortunate that these key points were ignored in the article.

Robert W. Norcross, Jr.

Consumer Service Alliance of Texas

Roanoke

To the editor: I’m writing on behalf of Cash America International, Inc. in regards to Betty Brink’s story “Cash-Trapped.” The story was filled with unsubstantiated facts about the pawn industry. We feel that we must respond.

To suggest that the pawn industry is unregulated is erroneous. Pawn is highly regulated on federal, state, and local levels.

In Texas, pawn operators are regulated under the Texas Finance Code, Chapter 371, which includes at least 14 subchapters. The regulations impose far more than the distance limitations as stated in parentheses in the first paragraph of the story. The Office of Consumer Credit Commissioner oversees pawn operators and audits pawnshops regularly to ensure compliance with the code. Additionally, the Federal Trade Commission defines pawn businesses as finance companies.

To suggest that the “floodgates will open” if the Fort Worth zoning ordinance is changed is presumptuous. I know these weren’t Ms. Brink’s words, but the quote was still allowed to stand without any substantiated facts. If Ms. Brink had done her own research, she would’ve found that no new pawn licenses have been granted by the Office of Consumer Credit Commissioner in more than a decade in Fort Worth. The zoning change in question took effect only two years ago. No one was rushing to open pawnshops for years prior to the change. So we ask, what research points to more pawnshops being opened if the ordinance is changed back? In other words, history doesn’t show this trend.

What Cash America is asking is quite simple – to be able to operate our shops in a conforming status at our current locations and to have a small degree of flexibility in the event of an untimely incident (i.e., natural disaster, fire, or change in a lease agreement).

Cash America and other reputable lenders provide a service to our customers that is less expensive than the alternatives (bounced-check fees, overdraft or late-payment charges). We don’t force anyone to use our products, but we feel fortunate to offer short-term financial assistance to those who need it. Our customers are hard-working Americans from all walks of life and are quite capable of seeking financial options that work best for them and their families.

As a publicly traded company that has been a viable part of the Fort Worth community for 25 years, we have worked diligently to change the image of the pawn industry. We operate clean, well-lit shops with exceptional customer service. Twice we offered Ms. Brink opportunities to tour our shops and gain a better understanding of our business. We also provided her with several facts to back up our written responses to her questions. These facts could’ve easily been researched and used as counterpoints in the story.

Cash America is a good neighbor. Through programs such as Keeping Communities Safe, we provide our customers with tools to help them protect their personal property, and we work closely with law enforcement to help foster healthy relationships that shield our neighborhoods from harm.

We only wish Ms. Brink had done additional research to present a more fair and balanced article, particularly when it comes to regulation for the pawn industry and facts surrounding the Fort Worth zoning issue.

Yolanda Walker

Director of Public Relations

Cash America International

Fort Worth

Editor’s note:The Texas pawn shop regulations referred to by the letter writers apply only to the licensing requirements needed to operate a pawn shop. There is nothing in the laws they cite that refers to payday lenders or in any way regulates the fees or interest rates that pawn shops acting also as payday lenders are allowed to charge their clients for a cash loan. A request from Fort Worth Weekly for an interview with Cash America vice-president Alex Vaughn drew no response. The Weekly reported his comments sent by e-mail through the company spokesperson.